Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20240713

Story for goldman sachs. Turn tonk of americas report numbers. Manus a warm welcome to bloomberg daybreak europe. Thing, wenteresting are talking the agony and ecstasy of brexit and pound trading. Mark carney has forced the banks into a neutral position. Banks are in a neutral fx position on sterling. For an overthecounter, unregulated market. I find that interesting. Nejra very. Perhaps we are hearing about the concept of a deal. What does that mean for Super Saturday and the pound . I love that phrase, agony and ecstasy a pound trading. Carrie lam is still giving her annual policy address by prerecorded video. Being interrupted a number of times with an legislative council. , the ability to requisition 700 hectors hectacres of land. Rush is narrowing their sales growth to the upper band of the prior guidance. They are going to increase the dividend. Their sales and Beat Estimates so it is about giving us a full year sales growth to the upper level of the prior guidance, narrowing in to the upper band. One of their other core drugs is really delivering. 1. 8 one billion swiss francs. The market had penciled in 1. 69. Triumphant pretty and they are going to grow broadly in line with sales. You have got a quick flash on how the pound is doing. Is it agony, ecstasy, or just possibilities this morning . Nejra yesterday, we definitely saw ecstasy but we pull back a little bit today on that sterling trade. We are hearing from strategists that we could get to 1. 4 if a deal is approved. There we are at 1. 27. What is the dup going to say to any deal . Foster had a long conversation with Boris Johnson. The yen is bid. We are seeing some risk off of the 10 year yield down to 1. 75 today. Manus there is one man who is caught of the walk, its jamie dimon third the stock hit dimon. The stock hit a record high they have options at the 3000 level putting a little bit of a lid on the jpm. Revenue dropped by 12 and Johnson Johnson raised the takes me to a little bit of asml. Its a breaking across the terminal. This is a company that makes the machines. Fourthquarter sales, thats a beat. The margins have slept and the markets have penciled in 49 . They will decide on a new share of buybacks next year. That could be the asked for the market of this morning. It might have been a little bit more hope they would go for a share buyback. As we say, equities, we are waiting for the next big peace of the jack sock. Could be china data or brexit, but the earnings seated season started with a boost. Nejra it gave equities a lift yesterday. All of these risks coming through, lets get back to one of them. Negotiations, of u. K. And eu officials are edging closer to a lastminute deal. Jumped on news that a Draft Agreement could be reached, but once cleared, johnson has to persuade key allies amongst his own conservatives. Maria tadeo joins us now from brussels. Negotiations over the past 24 hours, we are hearing talks of a concept of a deal. What does that mean for the summit . Thats right. The talks are ongoing but there is no denying this deal has a lot of momentum going for it with both sides saying very clearly they want a deal done and they still think theres time before thursday the talks are ongoing and the europeans have set a midnight deadline. Of course, we have got past the deadline and are now looking at lunchtime today. Of course, the next step is you take that to each member state and they look at it before tomorrow. The big question is if european leaders are ready to endorse the deal. But there is a lot of momentum going for this deal, thats undeniable. The tone has clearly changed. The big question mark is what happens next if the Prime Minister does get a deal done come friday. ,anus we have seen this before a deal done inhouse apartment. It is almost the garden gates in the parliament. What is the probability that johnson can get it over the line in the house of commons . Deal, which isa still a hypothetical. This is a question he is not in a position to answer and this makes the europeans a very nervous because we have been here before every time a deal has been agreed to. It has been done three times now and we are looking at the u. K. Making concessions in Northern Ireland, agreeing to customs that theresa may herself said no premise or would ever agree to. Does nothe premise or have a majority so it all depends on the dup. Those talks are ongoing back in london and im sure you seen those reports this morning suggesting the dup is looking at aliens, not millions, in to perhapsas a way bring in this deal. Billionstracting their is possibly the price we may have to pay. Metcalf, host, michael global head of macro strategy at state street. Good to have you with us. I want to take you straight to have the market looked have a look. Last week was agony. We were bidding on the price of puts. We cannot get enough of those. Are you in the camp of anticipating a deal . And do you want to rejoin a long cable position . Say, the risk around sterling, its hard to imagine it being more binary. We estimate that fair value for the pound is about 1. 37. If you get a deal, maybe does not go all the way there, but arguably, the sterlingembrace a discount that has been there since referendum has been reduced quite significantly. We dont have details yet or whether there will be a deal. Second thing is whether it will get through parliament. So the Downside Risks are still there. There are much lower than they were a week ago, but it is still very, very binary. Nejra if you are talking to clients about what deals might go through what do you get a sense that what is being discussed looks similar to theresa mays next up and that really we will just see the same thing all over again . Fosterss statement was a little bit terse. I think this is the real puzzle for investors. This looks quite similar to the other deal and that did not get through. I think thats why we have to be a bit cautious. s that we many if know we cant take anything for granted. Manus i was a bit disappointed last week. That is the best contrarian indicator. Out a story this morning that markets are trading like its 2016 we saw the last five days. A lot of people say the domestic market is based in. Terms, we have had the best couple of days since 2016. If there is a deal, we are under loved and under owned. Is that a fair starting position to reappraise . Yeah, and look. The equity implications of this have always been a bit more complicated. A littleis going to be bit uncomfortable from sterling going up so quickly. This would be the place to be in that case. You know you are going to get sterling appreciation and it will do well. The one thing we know from all of this is that we just need removal of uncertainty. We need a from trade talks and brexit. Think that somehow removes uncertainty is going to be a positive. Nejra what that make you more positive on european equities . So you are a little more favorable on europe. Risk for the rest of the world . Am fascinated. For three years, they came in and said to us all that brexit is not a global risk. It is a u. K. Only issue. So lets take it to the flipside. If there is a brexit to deal, deal,ould be brexit what would be the global ramifications . Michael its interesting the way you introduced that. Im trying to think if i have sat in this seat and said that. Manus if i had it i would show it. Michael the reason i think it is more systemic now, and its particularly true for europe, is that europe is on the brink of recession we know the banks have done better and they have been under a lot of pressure. Not necessarily global, but certainly for the u. K. And europe. Both economies are currently so weak. Thats why it becomes more systemic because a hard deal brexit temps the u. K. Into recession. Temps the eurozone into recession. Because of the global slowdown, europe is vulnerable to a hard no deal brexit. Will we avoid no deal . What is certainly true is that if it were just about the economic rationale to do a deal, the pressure has been rising in both cases. Manus where does this put the bank of england . We are talking about a 70 basis point cut. A near brexit deal stimulates investment to prevent the need for Monetary Policy. Week, it was said there may be a need to cut rates even if the u. K. Avoids a no deal. Of everybody, how quickly can the bank of england, or should they, normalized or move rates if we get a brexit deal . Michael good question. Those comments yesterday really struck me. Something really interesting was when we talked about if there was a delay they might need to ease. That is the point about uncertainty having a real damage to growth prospects. Deal, it really would depend on how the economy develops. It is still quite a soft global environment. We are about sterling depreciating quite significantly so i think it is very different to where we were say earlier in the year or at the end of last year where it looked like the bank of england would tighten if it werent for brexit. Now, Central Banks are in a very different place and most banks are trying to ease policy. Im not quite sure the bank of england would be so quick because sterling would appreciate so quickly. Nejra michael stays with us for the hour. Lets get first word news in hong kong. Thanks, naral. Nejra. Democratic candidates met for the fourth president ial debate in ohio. Joe biden defended his son against president trumps attacks and Elizabeth Warren faced criticism over how she paid for a vast government program. The candidates were united on one thing, they all support the impeachment inquiry into president trump. On pressure is mounting its advance into syria. They saint military operations are unacceptable. A former pentagon chief says leadt actions could to to the return of the Islamic State in syria. Been stopped from claiming the repo market according to jamie dimon. He says the lender has the cash and willingness to steady shortterm lending markets when they went haywire in september. He says jpmorgan did not read apply the money due to liquidity requirements. And south koreas Central Bank Cut its policy rate for the second time this year. It is warning it will be weaker than forecast. Thats as the Global Economy slows as trade tensions continue. The key rate now matches its record low of 1. 25 . China has caught traders offguard with a surprise injection into the financial system. The loans, head of datachina has offguard with a surprise this friday and are expected to show a slowdown in the domestic economy. The pboc has added the equivalent of 28 billion of cash. Its a surprise because it usually happens when the loans are due. And Warren Buffett is asking the fed for permission to raise the state in bank of america to more than 10 . Thats the level that often triggers a regulatory review. It is filing with the Federal Reserve and says berkshire will. Emain as a passive investor global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Manus China Threatens to retaliate against the u. S. Bill on hong kong. Carrie lams annual address has been disrupted by protests. We are live in the city. This is bloomberg. Nejra this is bloomberg daybreak europe. Im nejra cehic in london. Manus i am manus cranny in dubai. Lets turn to Hong Kong Carrie lam has delivered her annual policy address after being interrupted twice within the legislative council. To add further fuel to the fire, the house of representatives passed a bill that would require an annual review of whether hong kong is sufficiently autonomous from beijing to justify special trading status. China has responded by threatening to retaliate should washington an act the legislation. For the latest, lets get to sophie, joining us from hong kong. Lets start with the interruptions to the speech. It seemed to be appealing to the masses. The economy is what she focused on. ,arrie lam open her speech saying calls for independence will not be tolerated. Then, she dived into her pledges to boost affordable housing, increase land supply them and improve livelihoods and economic this is something that both carrie lam and beijing have focused on as a cause that has been underlying demonstrations. Critics say it does not understand the real, deepseated issues that have plagued hong kongs society. With these initiatives, some 200 of which were announced, there have been ideas such as Mortgage Loans being relaxed, but that provides a whole other host of potential problems for the market. Measures to let it is important to keep in mind there is ample room for even more stimulus with hong kong having about 148 billion u. S. Dollars in the war chest. This as there are attempts to shore up the economy. Carrie lam says the city fell into a technical recession in the Third Quarter. They have anticipated the imf cutting growth forecasts to 2. 7 . Nejra good to see you. On to chinas response threatening strong countermeasures. What do we know about those . Its uncertain what kind of strong countermeasures china will unleash. Did warned lawmakers against meddling in what it calls internal affairs. Retaliation was threatened only if the human rights and democracy act is passed by congress. While it has passed the house, there is still a vote pending in the senate which does enjoy bipartisan support. The act stops short of changing the Hong Kong Policy act of 1992 , which provides for hong kongs special trading status. We had a guest earlier from Hong Kong University of science and technology, noting that both the bill and any retaliation would have limited impact given that note alterations remain in that 1992 act. Nejra thank you for joining us. Michael metcalf from state street is still with us. We are seeing a strong reaction. Translate this into broader u. S. China tensions and the impact that might have for your review on risk. Michael a little bit like brexit. The pendulum of optimism and pessimism on the trade deal has been swinging very rapidly in the last week and a half. Developments in hong kong will swing it a little bit back towards pessimism. Making people think maybe a cant be found now after opening a new dispute on the hong kong issue. Manus i suppose it is which story do you believe and take us over the line. Response,out policy saw the pboc at some medium lending this morning. Some say it is a signal. We get growth data on friday, but look at this. This is aggregate financing and new yuan loans. We are waiting for this reaffirmation on friday. I wonder, are we underpricing the policy moves that have been enacted . In this aggregate financing, what the make of that . What do you make of that . Michael one of the broader questions we are trying to figure out is we know the Global Economy is slowing. We know china is slowing. 2016, this a repeat of which was just an industrial recession . About the level of seense commitment we have so far, it has been quite modest compared to 2015 and 2016. This injection is a surprise come a welcome development. Surprise, a welcome development. It will take a wild to feed through. Policy stimulus means we are on the recovery track rather than headed into recession. Looking at a binary and to the year whereby we could see risks multiplied . Or do these really go away and risk assets make a huge rebound . Michael its interesting. The discs are oddly less binary than they were this time last year. Its primarily because of manuss question, policy stimulus. This time last year, you could see the economy slowing, the threat to the trade war. There was also the third threat of the fed hiking rates. Where is now, we know all policy is much more accommodative. Manus absolutely, we talk about the october meeting shortly. Michael metcalf from state street stays with us. South koreas central bank has joined the wave of rate cutting. We will be talking about the potential for the global trade outlook. This is bloomberg. From the couldnt be prouders to the wait did we just winners. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy an eligible phone. Call, click, or visit a store today. Senator warren this is about donald trump, but understand. This is about this president and the next president and the next president. The impeachment must go forward. Senator sanders Mitch Mcconnell has to do the right thing and allow a free and fair trial. As a formeris prosecutor, i know a confession when i see it. This has to be about bipartisanship. Hownd i want to hear about cozying up to Vladimir Putin makes it great again. It does not make America Great again. It makes russia great again. Of americans not only support impeachment. They support removal. He should be removed. His actions are as offensive to their own suppose it values as they are to the values we share. Tothe senate does not vote remove donald trump, he walks out and feels exonerated, further deepening the divides in this country that we cannot afford. I just want to start by reminding everyone here that every candidate is more patriotic than the criminal in the white. I support impeachment, but we should not have any illusions that it would be successful or raise the problem that got him elected in 2016. Turn cannot and must not our backs on the pain of the working class of this country. And we have the responsibility to be fearless in the face of this president s criminality and lawlessness. Former Vice President biden i did nothing wrong, and my son did nothing wrong. He is going after me because he knows if i get the nomination, i will beat him like a drum. Nejra the democrats at the debate in ohio. There were clashes over policy between the two front runners, senator warren and former Vice President joe biden. The bank of korea has cut its policy rate for the second time this year. South koreas central bank warned they would be weakening the forecast with a slowing Global Economy weakened by trade tensions, and bloomberg has onrned they want a rollback terrence. President trump had a phase one trade deal that saw them buying american agricultural products, manus they want a rollback on tariffs. The imf made their fifth straight cut to the 2019 Global Growth forecast across the Worlds Largest economy. It is hugely important that this is a durable solution, because the negative impact of these trade policies are coming a lot into effect, and if we do not think there is going to be a durable solution, these effects will continue to have very weak weak globalg, very trade, and we need to stop that. Alfe, fromhael metc state street. Some talk about lag, and this was pretty much well flagged. Our question, and we talked about it, the three of us in the break, are the Central Banks going to keep a global head of the slow down, in your opinion . Iel so i would say would say they are almost actually ahead of it. The reason i say that is the last time we had a downward revision to Global Growth of this size was 2015, and in 2015, you know, we saw half a point taken off of Global Growth. It is very similar to where we currently are, and actually now, most Central Banks are in an easing mode. There is kind of a global, coordinated policy coordination going on. Quite been revised down quickly, but policymakers are being accommodative. Nejra that said, it was said there needs to be a deescalation of the tensions. Which central bank might be most at risk at this stage . Michael two things here. The Central Banks can do what they can, but how much . All they can do is offset the uncertainty created by trade. They cannot address that directly, unfortunately. Nejra yes. Michael the fed, in particular, i think has been very proactive, and they have eased policy even though it has been very delayed, and we are now beginning to see it. Banksk in general, the are doing a good job, but it is to offset the Current Situation with trade. Manus with that in mind, michael, have a look at this. This is what the market is pricing from the fed. That good news, the handshake and a deal, so we have this october rate cut expectation dissipating ever so slightly. We caught up with a man who dissented and went for a 50 basis point cut at the last meeting. Michael, do we need a mini shock reinforce really insurance live at the fed . Michael yes, a 50basispoint cut, i fear, is a doubleedged sword. If the fed were to cut 50, yes, it is the business sentiment, but it also potentially weighs on sentiment, because the first question then is, oh, what does the fed know that we do not, or are they seeing something in the economy that we do not, but the reality is, the u. S. Economy is growing pretty close to 2 , inflation not far from 2 , pretty close to full employment. This is an economy doing fine. If all of a sudden you start throwing in 50 basis point rate cuts, it may not have the desired effect. Nejra i think the latest comments from china or at least the reporting from bloomberg is that they want a rollback on tariffs before committing to buying anything more on agricultural products, so even though Central Banks are head of the curve, as you said, does this still make you cautious on risk and make you want to buy bonds, particularly treasuries . Michael throughout this year, there has been the bonds and the this month has demonstrated why they needed to be that way, because we have the that are binary, and we do not yet know where it is going to settle. The only thing you can hold onto is that the economic sense suggests that deals should be done, and it is just a question of when that begins to align with politics. Metcalfe with state street stays with us. Lets get our bloomberg first word news with oanh ha. Further work required. The Prime Minister is looking into a big cash payment to the region, but the democratic unionists want billions, not millions. London and brussels hope to have a deal in place before the eu summit starts tomorrow. Ankarae is mounting on to end the offensive in syria. Sanctions from the u. S. And europe and accusations of war crimes. Now, moscow has come out and said that the military are unacceptable. A military chief under present president obama said this could lead to the return of the Islamic State in syria. And regulations prompts j. P. Repon from moves in the market, according to chief executive jamie dimon. He said they have cash and willingness to steady shortterm lending markets. That is when they went haywire back in september. It is said that j. P. Morgan did not put their money back into repos due to liquidity. And raising a stake in bank of america two more to 10 , a level that often triggers a regulatory review, and Berkshire Hathaway hit the threshold back in july. Its filing with the Federal Reserve says berkshire will remain a passive investor in the lender. Unveil eu is expected to antitrust measures against broadcom, according to financial clients. For them torare pause the activity before the conclusion of a full investigation. The watchdog could talk to the clients about buying chips elsewhere. To is agreeing sell the bellagio resort to blackstone for over 4 billion. It will continue to operate the property under a lease agreement. It is under pressure from investors to unload its casinos. Just twots will have owned properties then. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. I am oahn ha. This is bloomberg. Ha, thank you. J. P. Morgan rose to a record after posting a jump in fixed income trading revenue and Investment Banking fees. Goldman did not do as well, taking a hit on investments such as uber. City paired losses after telling investors that expenses will drop in revenue will not. Michael from state street is still with us. Do you expect we might see more of that elsewhere with thirdquarter earnings . Michael well, it is important, especially the guidance we are getting, because you have to remember, the start of the month, we had these kind of shocking sentiment numbers that rose concerns about recession. If the earnings forecast is always loaded in the back half of the year, and they have not met expectations, but they have been beaten, and the guidance is good, yes, markets are really looking for recession risk. Warren buffett went all in on bank of america, in the eye of the crisis, and we have this scoop, this bloomberg scoop, that he would like to take a position of 10 . That is a pretty big statement by buffett, isnt it . Michael yes. I think it is interesting, because this is kind of like the the longterm investor, youre looking at the environment of banks, where you have got very low yields, flat or inverted yield curves, and slowing growth, and you might think you want to avoid the sector, but actually, potentially, he is a longterm investor and sees a lot of value in it still. Wasa yes, and it interesting, one of the things that was couched with these earnings is the consumer. Jp morgan generated the highest profit from its consumer unit in more than five years. How are you feeling about the consumer at the moment at this point, michael . One bright spot, not just for banks but for the u. S. Economy . The consumers have very broad shoulders, because we have weaker spending and trade, and this is the same comment i made about the u. S. Economy before. Fine. Using market is policy is really accommodative, so the only thing that could make the consumer role over, i think, is sentiment, and that is what the fed is doing. And in terms of exposure, back to lets take it bonds, credit, and equities. You go into 2020, and if you do not see a recession, the base case, going into 2020, how do you position across those three . Michael well, you have to try and think about where the money has gone and where the money might go. Throughout this year, for obvious reasons, they were holding back in cash, and cash values were quite high, and we do know a lot of money has been allocated towards fixed income and credit, in particular, and so i think next year, we get the removal of this from the market, you possibly end up going back into cyclical equities, and if we somehow get a trade deal, it is also back into industrials and that kind of thing, so we are not quite there yet, but it would be much more leaning towards equities than you would be fixed income. Michael, short and sweet. State street. Fe, here is a look at what should be on your slate. It is 10 years since the debt crisis. We look back at what a momentous day that was in that followed, mostrexit reached the critical hours. The eu is set to decide whether there will be a deal for the leaders to sign off on at the summit tomorrow. In the u. S. , we will be watching with Charles Evans discussing Monetary Policy while Robert Kaplan speaks in austin. The u. S. Ambassador to the eu, gordon sondland, is expected to test a guy before the Committee Investigating trump and is expected to testify before the Committee Investigating trump and ukraine. Do not miss our exclusive interview with a ceo at 6 40 p. Marksdon time, and today 10 years, how time flies, since the government said it was in serious trouble, and the debt crisis that followed. And Christine Lagarde. This is bloomberg. This is bloomberg daybreak europe. I am nejra cehic. Manus i am manus cranny. Ago, it was said there was serious trouble, and there was unprecedented fiscal derailment, and the euro zone debt crisis followed. 10 years ago, greece unveiled a black hole in the nations finances, a budget deficit twice as big as expected. And then anollowed, unprecedented debt restructuring, and it did not stop at greece. There were a five euroarea nations to be bailed out, calling into question the very fabric of the single currency, but it has held together. Much of that can be ascribed to the ecb and president mario draghi. The ecb is ready to do whatever it takes to preserve , and believe me, it would be enough. The ecb support has been most noticed in the bond market, with a 10yeararold yield, and the sustainability of the recovery is what counts. Mario draghi has stressed that Monetary Policy alone is not enough and is calling for more thene fiscal support, and the baton passes to Christine Lagarde. The euro zone imperiled, as the full head of the imf knows all too well. Deep division about policy within the central bank would not make her job any easier. And the Stock Exchange significant he outperformed other markets. With the banking index, up 80 , but still a long way to reach precrisis levels. Greece has to get 3. 5 of Gross Domestic Product every year until 2022, under the terms with its european creditors, but in september, the imf said a reduction in the greek fiscal targets would affect the economic and social recovery. Ofning us now is a founder thought for action, formerly an economist at the world bank, also a member of the greek parliament. Also still with us come our alfe inost, michael metc london. Good morning to you. Europeant where the members had said that there is something at that level that we should seek to adjust . How important is that for greece . Good morning. Good morning. Are coming out, if you like, from one of the most difficult crises that the country has had. Without having had a war. 25 , 27 of our gdp, and we need to grow back with much stronger and higher velocity rates than we are growing right now. Right now, we are growing at about 1 or 2 of gdp, and this has been a couple of years, so it would not necessarily allow for that adjustment to take place, and a reduction would be absolutely necessary. Elena, good to speak to you this morning. Is the euro zone better positioned for a crisis . Not think so. It needs to adjust a lot with how to handle a currency with 18 other countries who have their own mind, and every time they wish to make a decision of reform, they choose to throw it to the public and call it a democracy. You cannot necessarily run macroeconomic centralbank policies through populace opinions and those of that sort. Na, hold those thoughts. Lets bring in our guest host, e up statetcalf street. If Mario Draghis battle cry was to do whatever it takes, what should Christine Lagardes battle cry be . Should be act now, to government, or what is should it be act now, to government, or what do you think . Michael i agree a lot with what elena said. The ecb has done whatever it takes, and i do not think the fear and question today is what more can they actually do. It really does need, right now the European Growth problem has not gone away, so it is just crying out for for scala for fiscal stimulus. With Christine Lagarde, you think she definitely needs to move out of the box. What would that mean in todays context . Elena well, it is a bit of a trap. She is in a position where she cannot do really much, because we have heard for about 10 years how rulesbased things are, and since there is no rule now on how to handle and overly crowded, in terms of excess of 18es, economy countries, we do not really know in to stimulate the demand investment and lending, and we have proven that we do not know how to do that, because from 2008 until 2016, i think, we have had zero growth for the whole euro zone and only recently started having growth in the euro zone, and now, the fact that we have the slow and with thedemand lending, investing, and so on, again, we do not look at ourselves as an issue, but we are saying it is the trade war that is a problem, but there are a lot of reforms that have to happen, with each nation modernizing their industrial base. Manus well, the big criticism is perhaps nations did not reform quickly enough. You say the problem 10 years ago, the diagnosis was a liquidity crisis treated with austerity. What is the risk now of policy error that we go for more rate cuts and more qe . We cannot go greece cannot get into more qe, because we are two notches below investment grade, so we cannot get into qe, but even the ecb cannot continue with more qe, because it has reached its limits of how many bonds per month they can purchase, so they got to that limit on their own, so now, Christine Lagarde needs to figure out how she can generate Economic Policy that will stimulate demand and will stimulate investment in each of the national countries, along s work thatmission needs to continue with Fiscal Consolidation with the union, so i think there is more of a need of a strong leader in the ecb that will be depending on taking risks. We are not really known for taking risks, and these organizations and institutions have never taken risks. Mr. Draghi had been the best we have had in terms of trying as much as possible to push the limit but not really moving out of the limit. It, should be able to do but i am not sure. We will find out. I hope she will. The ecbichael, you said has done whatever it takes. Michael i will think the rules will need to change. The economic pressures could do it. Clearly there. Nejra thank you for joining us, and michael, our guest host, from state street. After hours of tense negotiations, a deal look nearer, and we are live in brussels next for the latest on brexit. Remember, bloomberg users can interact with the charts, using gtv. This is bloomberg. Ijra in the city of london, am nejra cehic. Manus and i am manus cranny from dubai. As going into the night, couldals obstacles derail any agreement. We are live in brussels. ,nd China Threatens retaliation supporting hong kong protesters. Meanwhile, carrie lam resorts to a prerecorded policy address after two failed attempts. Resultsquarter season get into gear results gear, and banko of america hits the slate today. Nejra welcome to daybreak europe. Manus, Officials Say negotiators are going to meet again wednesday morning, this morning, and that talks were constructive and progress continued. Manus yes, it is all eyes and ears. To get the deal, you have to bring that back to the house of parliament. What would they extract from boris to get on board . Here you go. The actual survey on the european registrations, 14 plus percent, before that going into negative territory, so this is on the month. We actually saw an expansion by the eu new car registrations, so that is the very latest and seems to be putting in a little. Lets tell you where the money went, volkswagen. A 47 rise on the month, still down on the year at one. On the month renault up 27. 8 . Gainw, barely eking out a of 1 . Tenths you have got a little bit of a look at the futures, so the s p drifted back. Nejra absolutely. Before i get to the futures, i have a secret for you, manus. I do not actually have a driving license. Change,numbers, some but some of this has to do with the latest with hong kong and what china has been saying in terms of retaliation to that u. S. Bill. Yesterday, we really saw a lift to u. K. Stocks and also positivity around brexit pushing me stoxx 600 up. The ftse futures down, and the dax and cac futures lower, so a lot of things coming in and affecting sentiment, and so far, brexit and what we are hearing from hong kong. Market, the fact that the chinese, and i think you back to this up very clearly in the last hour, the fact that the chinese want tariffs rolled back, they are expected to buy 50 billion worth of agricultural products, if they do not get the rollback, they will be less than inclined, and bonds are a little bit higher, i think, on the back of the fissures that are appearing. Hong kong still very much on peoples radar, so we are seeing a flow of money into the bond market at the bottom of the board. Breakeven, this might be at a threeyear low, but they are not that cheap. Banks areon is if the ahead of the curve, and michael e thinks the banks have done a good job. Lets go to Juliette Saly in singapore. Manus, a wild day, off the highs of the day, as you and nejra have been mentioning. Prodemocracy protesters in hong kong, asian stocks up by about 6 10 of 1 , and all of the focus has been on the hang seng, and after we saw carrie lams speech getting some relaxation to the mortgage rules, you are seeing some development, and the hang seng is higher by 4 10 of 1 . The currency is weakening today. We had a different mix coming through in terms of a weaker fix , and a tick up in yields and south korea after the bank in korea cut rates, matching a previous record low. Lets have a look more at what is happening in hong kong though, because this speech from carrie lam was widely anticipated, and we were expecting to see some concessions in terms of the property market. Buyers will be able to purchase a property with just a 10 deposit, up to a maximum hong kong 8 million, which is one million u. S. Dollars, and as it was put, it is not the relaxation of mortgage rules that has a lot of people concerned. It is the superhigh home prices you are seeing in hong kong, meaning it is hard to get into the market despite relaxation, and you can see here, we have had the handover. Prices havehome gone up, rising by about 400 , so still a very hot property market, even though we have seen some mortgage relaxation coming lams speech. Rie nejra talks will resume after hours of tense negotiations that a british official described as constructive. Maria tadeo joins us. Are we still talking about this concept of a legal text . Maria good morning. That is the question. There was no breakthrough. That was seen as the deadline to come up with a legal text that they would be able to present to european leaders before thursdays summit. Now, there was no breakthrough yesterday. We are being told talks will continue. The spin on this is still very positive. They are saying it was constructive, and that will continue this morning, but they were not able to get that optimism, and that should ring a some alarm bells. In terms of today, we are looking at a different deadline. We are looking at 2 00 p. M. That is when they are expected to get a text if, we do, in fact get one, and every leader will be briefed on that. This will be if there have been enough movement and concessions. At this point, it is unclear. But it hasecting it, not actually materialize. Manus tell me this. You have got to get it through the house of commons. The numbers stack up, as we understand, at 707. Maria that is right, and, manus, here is the thing, and this is what officials will tell you time after time. They do not want to move too much until Boris Johnson has the numbers. To get it cleared by the u. S. House of commons, every time, i am sure your member, it has been rejected. Europeans are i am sure you remember, it has been rejected. Europeans are wanting an answer. Of course, he depends on the dep, and they said they would not accept a deal that treats Northern Ireland differently. If the irish that could be very problematic. It is perhaps suggested he will put forward or will have to put forward a lot of money to sweeten this deal that will go to the dep. Tadeo,bloombergs maria thank you. And a guest is with us. Great to have you with us. The Merrill Lynch survey showed we have time to start buying into u. K. Stocks with conviction. I think the movement we have seen since friday is that we are inching towards a deal, and as you say, europe is on its own, and the sterling is undervalued. I think he will see a sharp shift. The key beneficiaries of that will obviously be domestic stocks. It is interesting to see the ftse 200 the ftse 250 up. They will be the biggest beneficiaries. Manus yes, the ftse 250 had the strongest week since before the referendum. I just wonder about confluence with that type of risk on, if there is a deal, and it gets through parliament. Of course, we could see it climb up to 1. 40. What about the ftse 100 . Affect any of this rally that we potentially have in the market . I think there is the ftse 100, largely International Names that benefit from a weaker sterling, so there, the impact would be more muted if you saw a rally in the sterling, and compare that to the ftse 250, which is broadly domestic, so as we mentioned, it would be the biggest beneficiary and would suffer less of an impact from a rising sterling, but the u. K. Economy is clearly in a bad place at the moment, and the more we see with the results we far,seen with q3 so actually having a large impact on corporates, as well. In the last few days, we have had some warnings, and these are a wide range of sectors that really show the uncertainty surrounding brexit. It is beginning to bite, and consumers and others need clarity. Nejra and with that ftse 100 and ftse 250 distinction, we saw the ftse 250 drop along with european equities, interesting, anymore than 1 , so if we look at just the ftse 250, marcus, and you want to trade on brexit, is that something you are wanting to do, like buying things like homebuilders and other sectors that are going to be sensitive and rally on a brexit deal . I am still a little bit nervous, because we have been here before. While we are inching towards a deal, Boris Johnsons biggest hurdle might be getting the deal approved at home. Partyis a faction of his that have said they will only we must remember he is in a minority government now, so boris, he probably has more chances selling that deal than theresa may, but it is certainly not a foregone conclusion. Manus it just depends on what size the check is, doesnt it . That could be one suggestion. European stocks are at a twoyear high relative to the u. K. With a brexit deal in play, how do you play out that european swoon . Marcus if we do see a deal, u. K. Would benefit the most. Unfortunately, you look at the inverse perspective, for the european investor, one of the biggest reasons we have heard from International Investors over the past three years has not been brexit, and the u. K. Represents about 30 of european stock indexes, so we clearly have to remember that there is a clear correlation between those two, but the u. K. As well as europe are both heavily underrated. Marcus morriseylon. Lets go to oanh ha. She is in hong kong. Oanh in the u. S. , Democratic Candidates met for the fourth democratic debate in ohio. Former Vice President joe biden defended his son against attacks, and senator Elizabeth Warren faced criticism over how she would pay for her vast government programs, but the candidates were united on one thing, the need for the impeachment inquiry into president trump, and pressure on syria. Sanctions from the u. S. And europe and accusations of war crimes. Now, moscow has come out and said the military operations are unacceptable. A former military chief under president obama said recent actions could lead to the return of Islamic State in syria. And south koreas Central Bank Cut its policy rate for the second time this year, warning growth will be weaker than forecast as the Global Economy slows as trade tensions continue. The bank of koreas policy rate now matches its record low of 1. 25 . Guard. Aught traders off loans to banks ahead of data this friday, expecting to show a slowdown in the domestic economy. An equivalent of 20 billion of oneyear cash. It was a surprise, because it usually happens when the loans are due. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. I am oanh ha. This is bloomberg. So much. Ank you coming up, hong kong on the brink. Chief executive carrie lam says the city largely slipped into recession as protests continue. You can tune into Bloomberg Radio on your mobile device or Digital Radio in the london area. This is bloomberg. Inus it has just gone 7 18 the city of london, 41 minutes away from the start of european trading day. It is daybreak europe. I am manus cranny in dubai. Nejra and preparing for stimulus if gdp takes a hit, german officials commenting on a shift in the fiscal policy. Interesting, from allianz global investors, still with us, we were talking about the shift. What might this mean for the strategy . Germany more willing to take up the fiscal baton . It is really another step in that shift. You have seen this with European Countries but also the u. S. In recent months, and the negative part of it is it really is a response to the deterioration of Economic Data have seen. We had the imf yesterday down globally downgrading Global Growth. Heading in the wrong direction. I think it is positive, but we need to take this with a pinch of salt that this was really a measure pushed into. Manus and you are right. 1. 9 uro area, one. 1 from in 2019. In 2019, one1. 9 of the worst in years. A pretty bad economic scenario for europe. Where is the biggest value in that scenario if, as you say, they have been pushed into physical or to reduce the what about in terms of how you allocate capital . Marcus we need to look at companies where you can be sure of the earnings, and what we have seen over the last couple of quarters is there is convergence between the high quality growth names, which are richly valued, and the cheaper cyclicals, were actually the end markets appear to be in many places deteriorating rather than improving. A company that can be good in economic environments, we have been pairing up for policy growth and opportunistically looking for various areas of the market where the underlying trends are improving. The one area that might be interesting at the moment is the Airline Sector. The Airline Sector has had a rough time over the last couple of years due to excess capacity growth, but what you see now, partly a result of the 737 max 8 lays, but also the accuracy of thomas cook, and that is improving and dragging yields up. You have seen easyjet and ryanair bounce 40 off their lows in recent months. Manus good news for michael oleary. Get your flights. A poster child for michael oleary. Stay with us, marcus, a European Equity portfolio manager. Lets turn to hong kong now. Chief executive carrie lam has delivered her annual policy addressed by video after being interrupted twice citing global slowdown and months of protests. Lam admitted the city would likely be in a technical recession in the Third Quarter. A has beenaruddin tracking the story in hong kong. Sophie, it was by video. What did we learn . Who did she focus on in that speech . 51minute speech, carrie lam announcing 220 initiatives. She focused on the economy, announcing measures such as boosting housing supply , and with 148 billion in fiscal reserve housing supply, and billion in fiscal reserve, it remains to be seen how much legislative should support legislative she will get. This fiscal largesse is not likely to win hearts and minds. She ignored political frustrations. The realcs would say issues plaguing the city. We may get more color when she has a press conference in about 40 minutes here in the city, so altogether, the stakes high for carrie lam, as she is the first chief executive to break away from tradition of delivering that address to the Legislature Since 1997. Nejra sophie, as we look ahead to the News Conference in 40 minutes, as you mentioned, how worried should we be about what china has said about retaliation about the u. S. House passing the hong kong bill . Sophie carrie lam may want to strike a balance here. Seen the responses we have from both hong kong and beijing to the u. S. House passing the bill on hong kong, so today, we may see carrie lam reaffirm that hong kong is administered by hong kong people and that she is upholding the one country, twosystem regime, and when it comes to china, it was a fiery warning from beijing, cautioning u. S. Lawmakers from meddling in internal affairs. It is not clear what measures they would turn to as it looks sovereignty,s which is sacrosanct on the mainland, so the u. S. China trade negotiations may see some impact, but i want to highlight one perspective that was earlier on bloomberg tv, with the Hong Kong University of science and technology, one man saying there could be limited impact, because we look at the assets in question, it does not change the Hong Kong Policy of 1990 two, which allows Hong Kong Special trading status policy of 1992, which allows for hong kong to a special trading status. Nejra jp morgan rose to a record with a jump in fixed income trading revenue, and goldman did not do as well, taking a hit on investments such as uber. Today, it is bank of america. Our guest is still with us. We saw in the market yesterday, this was largely based on earnings, marcus. Is this that you continue given the expectations we had going into the Third Quarter . Marcus we cite downgrade in the runup to results in recent months as a result of recent data, and in q3, the market now 2 year on1 a year. The market is expecting 10 Earnings Growth for 2020. For me, that looks slightly high. Ishink what you will see many management teams being more cautious in lowering expectations as we move through to the turn of the year. Manus and we had that boon, didnt we, last year from the tax cut in the u. S. , the Corporate Tax give back to corporations. Does that fade out of the story at the end of this year, because we have had the buyback momentum . Marcus yes, absolutely. In the u. S. , that will move through the final months of this year. I think the real positive we have, really, into next year, is it will likely generate zero Earnings Growth, and you may actually conceivably have two strong tailwinds, if we see brexit resolution and a Movement Towards a u. S. China trade deal, so i think it will be important for judging the backdrop of 20. Nejra great to have you with us, marcus. And that is it for daybreak had,e, manus, and coming we have the european open. We are looking at a mixed picture, lots for investors to be worried about, hong kong not the least of it. Manus yes, keeping an eye on sterling, we have clawed back some of those losses, and negotiators get back to the table later today. We will track it all right here on bloomberg. Anchor good morning. We are live in the city of london. I am an edwards alongside matt miller in berlin. Stocks turned sour despite strong results from the u. S. Banking sector, as jamie dimon adds his voice to the cores of worry about the Global Economy. The cash trade is less than 30 minutes away